The following article was contributed by Corcentric COO Matt Clark.
Technology has been transforming finance and banking since 1865, when the pantelegraph, which was commonly used to verify signatures in banking transactions, was invented. Whether you’re looking at credit and debit cards, ATMs, or e-commerce, technology has changed how people manage their personal finances and purchase and pay for goods. Likewise, technology has transformed B2B transactions with software and SaaS solutions affecting the AP, AR, and procurement functions within an organization. Now we’ve entered into a new phase of alternate financing for the 21st century…fintech.
But does using technology for finance functions actually the same thing as fintech?
In today’s technology, true fintech providers offer not just technology that simplify complex transaction processes; they also pay suppliers at an agreed upon timeframe, giving them the cash flow necessary to grow their businesses. Harvard Business Review recently posted an article that discussed how fintech is impacting the supply chain, stating that fintech companies “enable both the buyer and supplier to improve their working capital by making it possible for the former to extend its payables and at the same time accelerate payments to the latter.”
This is especially valuable for smaller suppliers or dealers/distributors that act as the retailers for manufacturers. These businesses cannot necessarily afford to wait for payment from buyers that are looking to pay in longer and longer cycles. The process sounds simple – a buyer places an order but instead of invoicing the buyer directly, the supplier’s invoice is transmitted to and paid by the fintech provider which then sends an invoice to the buyer who then pays the fintech provider directly.
But enabling cash flow and cash management is just one side of the fintech coin. The technology that enables all of this to occur without one piece of paper, one phone call or any manual intervention is what really moves this to another level. We’re talking about a technology solution that actually manages all transactions, ensures contracted prices and terms compliance, provides visibility into the transaction for both suppliers and buyers, and does it all digitally on the fintech provider’s platform. This significantly reduces the likelihood of disputes which in turn results in staff spending less time on the phone and more time on strategic tasks.
At Corcentric, we’ve created a platform and network that goes even deeper into servicing both buyers and sellers. If disputes arise, our transaction experts intervene and manage the dispute process, keeping the supplier and buyer at arms’ length. That distance enables them to maintain a good working relationship with one another. In addition, as a true fintech company, we also verify credit rating and provide buyers and sellers with an audit trail that gives them a true portrait of their company’s cash position.
In an economy where every penny counts and each expenditure is under a microscope, businesses need to grow revenue without growing overhead. Automating all of the financial processes, providing upfront funding to suppliers, and extending the payables for buyers make this goal easier to achieve. However, some companies may loosely use the term fintech when describing their services. A technology company may not have financing capability. Banks may offer financing but likely do not have the technology platform that manages all of the transaction processes automatically. Businesses need to ensure that the fintech company they partner with is good on both ends…that they truly provide the “best of both worlds.”
Corcentric makes B2B processes run more efficiently and effectively by streamlining, automating, and accelerating processes.